Economy drops for second straight quarter

Dennis Seid 5/29/09
Economy drops for second straight quarter
* Gross domestic product shrinks at 5.7 percent pace.
By JEANNINE AVERSA
The Associated Press
WASHINGTON – The economy sank at a 5.7 percent pace in the first quarter as the brute force of the recession carried over into this year. However, many analysts believe activity isn’t shrinking nearly as much now as the downturn flashes signs of letting up.
The Commerce Department’s updated reading on gross domestic product, released Friday, showed the economy’s contraction from January to March was slightly less deep than the 6.1 percent annualized decline first estimated last month. But the new reading was a tad worse than the 5.5 percent annualized drop economists were forecasting.
It was a grim first-quarter performance despite the small upgrade. It marked the second straight quarter where the economy took a huge tumble. At the end of last year, the economy shrank at a staggering 6.3 percent pace, the most in a quarter-century.
Economists are hopeful that the economy isn’t shrinking nearly as much in the April-to-June quarter as the recession eases its grip. Forecasters at the National Association for Business Economics, or NABE, predict the economy will contract at a 1.8 percent pace.
Other analysts think the economic decline could be steeper – around a 3 percent pace. Some think it could be less – about a 1 percent pace.
“Things are getting less awful,” said Bill Cheney, chief economist at John Hancock Financial Services.
Less dramatic cuts by businesses factor into the expected improvement. Consumers, however, are likely to be cautious. There’s been encouraging signs recently with gains in orders for big-ticket manufactured goods, some firming in home sales and a slowing in the pace of layoffs.
“The speed of the drop will slow,” predicted Ian Shepherdson, chief U.S. economist at High Frequency Economics.